Death of Senator Kennedy Leaves Void in Senate

Senator Edward M. Kennedy, whose career in the Senate spanned 46 years, died Tuesday, August 25, at the age of 77. As Chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, Senator Kennedy was passionate about the need for healthcare reform, which he considered “the cause of my life,” and the fate of healthcare reform legislation in Congress is left in an even more precarious position with his passing.

After being diagnosed with a malignant glioma in May of last year, Mr. Kennedy’s appearances in Washington became increasingly less frequent, and he turned over the work of his committee to his friend and Democratic colleague, Christopher Dodd. Under Mr. Dodd’s leadership, the committee passed a healthcare reform bill on July 15, but further action in the Senate has been stalled while Senator Max Baucus, who heads the Senate Finance Committee, seeks to craft a bill covering key financing provisions that will have the support of Committee Ranking Member Charles Grassley and other key Republicans. Progress on reaching a bipartisan compromise, however, has been undermined by a groundswell of conservative opposition to reform efforts, which have characterized the bills as enabling a government “takeover” of the healthcare system. The passions the issue has aroused among the conservative base have made it difficult for Mr. Grassley, who faces a reelection campaign in 2010, to appear to be working with Democrats on passing a bill. Mr. Baucus has set a deadline of September 15 for reaching a compromise with Mr. Grassley and other Republicans. If he fails to reach a compromise, as appears increasingly likely, then Senate Democrats may seek to force through legislation by invoking a process called “reconciliation,” which requires only 51 votes to pass the Senate, thereby bypassing the typical 60 votes required to avoid a filibuster. Because the reconciliation process was designed only to avoid Senate impasses on budgetary measures, however, key healthcare reform provisions unrelated to the federal budget, such as private insurance market reforms, would likely need to be separated into a second bill that would require 60 votes to pass the Senate. With Mr. Kennedy’s death, Democrats now have only 59 seats in the Senate, and my effectively have only 58 votes, since the frail health of Senator Robert Byrd has resulted in his absence.

The fate of healthcare legislation in the Senate has put a spotlight on the issue of who will fill Senator Kennedy’s seat. By Massachusetts law, a special election is required to be held 145-160 days after the Senate seat is vacated, with no interim appointment, meaning the seat will be vacant during the important upcoming months. Prior to his death, however, Mr. Kennedy urged state legislators in Massachusetts to amend the law and allow Governor Deval Patrick, a Democrat, to appoint an interim replacement until the special election can be held. Prior to 2004, Massachusetts law enabled the governor to appoint a successor to a vacant Senate seat. Ironically, however, it was Democrats who amended the law at that time because they did not want Republican Governor Mitt Romney to appoint a Republican successor if Democrat John Kerry, the other Senator from Massachusetts, had won the presidential election that year. Changing back the law now, therefore, would risk charges of hypocrisy.

While known as a liberal, Senator Kennedy had a history of being able to forge bipartisan compromises with conservative Republican colleagues in order to pass important legislation. His absence in the Senate in recent months has certainly complicated the task of reaching a compromise with Republicans over healthcare reform legislation, and now it will be up to his colleagues to see if they can salvage the work of his HELP committee and further add to Senator Kennedy’s legislative legacy.

The Public Option and Healthcare Cooperatives

The Obama administration spent the early part of this week seeking to assuage concerns that it was backing away from supporting a “public option,” a health insurance plan sponsored by the federal government that would compete with private plans in offering healthcare insurance through insurance exchanges in each state.

The public option has become the most contentious issue in the debate over healthcare reform. Opponents claim that a public option would undermine the market for private insurance, mainly because it would not incur the expenses of marketing and having to negotiate reimbursement rates with a network of providers, thereby enabling it to charge lower insurance premiums than private plans. In my view, it is not a foregone conclusion that a public plan would necessarily have an unfair competitive advantage in attracting beneficiaries. As some observers have pointed out, it is possible that a public plan would attract a disproportionate number of very sick beneficiaries, thereby saddling it with higher medical costs and possibly forcing it to charge higher insurance premiums than private plans, particularly if risk adjustments based on beneficiaries’ health status do not fully cover the higher medical costs.

Nevertheless, while a public plan would not necessarily pose such a dire competitive threat to private insurance plans as its opponents claim, given the difficulty of explaining the complexities of healthcare reform, opponents have been successful in simplifying the issue of healthcare reform as a further intrusion of the federal government into the practice of medicine. Therefore, to move the discussion beyond the role the federal government would play in offering a new health insurance plan, the Obama administration sought to downplay the public option.

This move angered supporters of the public option, who believe that, without the competitive pressures of a public plan, private insurers will not be forced to rein in spending growth. But the experience of private plans in the Medicare Part D drug benefit demonstrates that, even in the absence of a public option, competition among private plans can serve to drive down costs.

As an alternative to a public option, there has been some support for facilitating the creation of non-profit healthcare cooperatives that would compete with private plans. In fact, there are successful models for such a proposal, such as Seattle-based Group Health Cooperative, which is known for providing cost-effective, high-quality care. The problem is that such examples are relatively rare, and establishing cooperative from scratch takes time, with no guarantees that a new cooperative will succeed in attracting a critical mass of beneficiaries or be able to negotiate competitive reimbursement rates with local providers. Competition in some local insurance markets, particularly in rural areas, is currently often limited, with one plan often holding a dominant market position. Because the lack of insurance market competition is likely rooted, at least in part, in the relative scarcity of healthcare providers in these areas, attempting to foster competition through insurance market reforms may end up having little or no impact. In any case, some prominent Republicans have already expressed their opposition to cooperatives, too, so abandoning the public option in favor of healthcare cooperatives might not be the recipe need to attract Republican support.

The impasse appears to have left the Obama administration wondering if there is any formula for reform that leading Senate Republicans would support. There is now talk of splitting healthcare reform legislation into two bills, one of which, by using the reconciliation process (see Who is Alan Frumin post dated August 7), could pass the Senate with the votes of just 51 Democrats. This bill would include the new spending measures, such as Medicaid expansion and subsidies for health insurance premiums of low income beneficiaries, as well as the financing of these measures, and possibly could include the public option. The second bill, which would need to pass the Senate with 60 votes to avoid a filibuster, would include reforms to the market for private healthcare insurance. Of course, the Obama administration is still hoping that Senator Baucus can forge some kind of compromise in the Senate Finance Committee that attracts Republican support, but they are preparing a plan to push through reform legislation in the event a compromise fails to materialize.

Who is Alan Frumin?

As Congress heads out for its summer recess, Senator Max Baucus, who chairs the Senate Finance Committee, is now saying he has set a deadline of September 15 for his committee to release its version of a healthcare reform bill. That date is important because it is exactly one month before the expiration of the reconciliation provision that would allow a healthcare reform bill to pass the Senate with a 51-vote majority, thereby bypassing the normal 60-vote majority required to avoid a filibuster.

Presumably, if Senator Baucus fails to reach a consensus on a bill with Republican Senators Grassley, Snowe, and Enzi by September 15, the Democrats will try to force through legislation before the reconciliation provision expires on October 15.

The reconciliation process, which was established by the Congressional Budget Act of 1974, was created to prevent Senate filibusters from derailing necessary budget bills. In accordance with the Byrd rule, named for its sponsor, Senator Robert Byrd, however, the Senate is prohibited from considering “extraneous matters” as part of a reconciliation bill. In essence, any provision in a bill that does not result in a change in outlays or revenues could be interpreted as “extraneous” to budget matters. Accordingly, if the Democrats try to force a healthcare reform bill through the Senate using reconciliation, any senator can challenge provisions in the bill, such as the requirements for insurance companies that are at the heart of the healthcare reform bill, as being extraneous. It is then up to the Senate parliamentarian, an obscure unelected official who advises the Senate on parliamentary rules, to determine if the provision being challenged is extraneous. If the Senate parliamentarian rules in favor of the challenge, the provision is taken out of the bill. A series of challenges under the Byrd rule, therefore, could strip many key provisions out of a healthcare reform bill, rendering it meaningless.

And who is the Senate parliamentarian? An official named Alan Frumin, who almost certainly would prefer to avoid being thrust into the spotlight in a battle over healthcare reform.